Assessment of cost of externalities for CEB thermal generation options

Abstract

Costs of externality are effects that are typically not taken into account in finalizing the market price of goods or materials. Environmental impacts and social damage costs are the main externalities needed to be considered.There is a growing requirement for policy analysts to take account of the environment in their decision making and to undertartake the specified cost benefit analysis. Therefore it is a vital fact to monetary value the social and environmental damage that can be occurred due to an infrastructure and to use it as a variable cost. In the case of power generation, electricity production causes environmental damages of which the associated costs are not borne by the producers or consumers of that electricity. Hence, true generation costs should include both the private costs incurred to provide power such as capital cost, O&M cost and labour and the external costs of damage to the environment. In Sri Lanka, due to the absence of reliable health and environmental impact studies, an estimated value of 0.13 US Cents/kWh was added as the social damage cost for the scenario studies of coal in Long Term Generation Expansion Plan, (2012 -2032) by the Generation Planning unit of Ceylon Electricity Board. Thus, in this research, a realistic monetary value for the social damage cost is assessed for coal power generation studies in Sri Lanka based on the environmental and social impacts associates with it. The Impact path way method is discussed and used for the monetary valuation. The respective pollution levels are obtained by means of Gaussian plume air dispersion model. Then with certain assumptions and limitations, value of 0.08 US Cents/kWh is derived as the external cost or the social damage cost for coal power generation studies .Finally, conclusions are drawn based on results and sensitivity analyses